Thursday, 8 October 2015

Why Theresa May is Wrong About Immigration

Centre for Research and Analysis of Migration (CReAM) at
University College London

When Theresa May says that "at best the net economic
and fiscal effect of high immigration is close to zero" and that
"there is no case, in the national interest, for immigration of the scale
we have experienced over the last decade," she is ignoring persuasive
arguments that immigration may in many cases be economically beneficial.

Severe restrictions on migration of labor prevent businesses
from looking widely for skills they need and prevent workers from moving where
their labor is most valued. There is suggestive evidence that migration may
promote growth through encouraging innovation, trade and entrepreneurship.
While public concern over the
scale of migration in recent years is undeniable, to minimize the
economic benefits as May does distorts what we know about how the economy
responds to immigration.

May
argues that "for people in low-paid jobs, wages are forced down
even further [by high immigration] while some people are forced out of work
altogether." These are strong statements, not confirmed in the academic
literature.

The labor market effect of immigration is in fact a subject
that has been comprehensively studied in
many countries over many years, and few studies have been able to pick
up the sort of negative impacts that she speaks about. This is true as much in
the U.K. as it is elsewhere. Evidence on newcomers to the U.K. shows that they
are typically better-qualified than the British-born workforce, but
nevertheless tend to work initially in less well-paid jobs, downgrading while
they pick up skills specific to the new labor market.

Regional comparisons of what happens to wages at different
points in the distribution suggest that it may well be in those lower parts of
the wage distribution—where immigrants work in early years after arrival—that
impacts on wage are felt. However, estimated effects are small and, since
immigrants tend to move up the wage distribution as they stay longer in the
country, these impacts are quite probably temporary. Moreover, there are
counterbalancing wage gains higher up the wage distribution and the overall
effect is, if anything, positive. As regards effects on employment, no
convincingly robust evidence exists that employment of the British-born is
harmed.

The other aspect concerns public finances and delivery of
public services. Far from the effects here being "close to zero," the
best evidence we have suggests that, in the decade from 2001 onwards, migrants
contributed more to the public exchequer than they took out. This applies
particularly to migrants from within the EU but also non-EU migrants, and this
was at a time of overall fiscal deficit, when the average British-born person
was contributing substantially negatively. Critics of migration often point to
supposed 'welfare tourism,' but immigrants are actually less likely to claim
benefits than British residents.

The Home Secretary also points to effects on specific
services, claiming that "when immigration is too high, when the pace of
change is too fast, it's impossible to build a cohesive society. It's difficult
for schools and hospitals and core infrastructure like housing and transport to
cope." The positive exchequer costs discussed above, comprehensively
measured in the sense that they include estimates of burdens through use of
public services, indicate that migrants' taxes more than cover the costs which
they impose.

Moreover, evidence suggests that immigrants are no less
healthy than the British-born and use the NHS no more frequently. Immigrants
with work opportunities are not more likely to commit crime. The presence of
non-English speaking children is not harmful to English-speaking children's
education. Income from overseas university students is beneficial to higher
education. Immigrants provide a disproportionate share of staff in much of the
public sector.

There will, of course, be short-term costs of adjusting to
cope with inflows of new people, but alarmism should not distract from fact
that immigration is fiscally beneficial and not harmful to the public sector.
In the end, politicians need to adjust public services to immigration-induced
demographic change—in the case of the U.K., recent immigrants have contributed
what is needed towards the cost of adjustments required.